Spain's Directorate General of Taxation clarifies scope of amended mortgage-loan rules

The Directorate General of Taxation (DGT) has responded to a binding consultation made by the Spanish Banking Association regarding the effects that recent amendments to Law 2/1994 have on the scope of application of the tax benefits in mortgage loan transactions.

The amended law's previous wording referred to transactions in which the creditors were "financial institutions"; this reference has been replaced by "real estate lenders". Moreover, the definition of the term "real estate lenders" is cross-referred to another legal text (Law 5/2019).

In particular, it was asked whether the exemption for transfer tax, in its modality of stamp duty, regulated in Law 2/1994, will continue to be fully applicable to transactions involving the amendment of mortgage loans (with the same conditions that were already required), but in which the debtor is a legal entity and regardless of whether the property on which the security interest is based is for residential or other use.

'Real estate lender'

The term "real estate lender" is defined by reference to article 4.2 of Law 5/2019 of 15 March, regulating real-estate credit agreements, as "any natural or legal person who, in a professional manner, carries out the activity of granting the loans referred to in article 2.1(a) and (b)". Such loans are (a) loans secured by a mortgage or other security interest in residential property, and (b) loans for the purpose of acquiring or retaining ownership rights in land or real property built or to be built, provided that the borrower or guarantor is a consumer. Therefore, with the various statutory references involved in defining the term "real estate lenders", the scope of the exemption seemed to be considerably restricted.

However, the DGT admits that, in an integrating interpretation of Law 2/1994, it can be understood that these references refer exclusively to the person or entity defined as "real estate lender", without taking into account the recipient of the financing nor the object of the mortgage financing, since this provision is defining the lenders who will be able to be novated by the debtor in the mortgage loans granted by other similar lenders.

Osborne Clarke comment

In short, the purpose of the amendment is to extend the list of persons and lenders to which Law 2/1994 and the tax benefits it sets forth apply, which was previously limited exclusively to "financial institutions" (also defined by a legal reference, this time to Law 2/1981).

It therefore includes natural or legal persons who, not being financial institutions, are professionally engaged in granting mortgage loans or credits to finance all types of real estate transactions.